How will having a BTL affect my affordability?

Fackers

A little complicated situation but I hope to keep it brief.

Girlfriend has a mortgage on a flat. We’re looking to buy our first house together (I’m free of commitments). She would like to change her mortgage on the flat to a buy to let to rent out.

How would this likely affect a MIP together. Is it better to sell up and go into it as a chain (the flat will be snapped up given being in the centre of the city). OR change to BTL and buy the house we want together - BUT how would this affect our affordability?

TIA

LRmortgage

If the rent on the flat will cover the new BTL mortgage then there are lenders that will effectively ignore that in the background.

Worth getting a broker on the case to make sure you’re using the right lenders for each mortgage.

ACG

It depends, will the rent cover the BTL mortgage repayment plus any service charges? If not, then you may find your affordability affected to some extent.

Also, some lenders will cap their maximum LTV if you have a property in the background, so well worth checking before you do any credit checks.

[Deleted User]

You'll also have to factor in the higher rate of SDLT.

pjcox2005

Lover_of_Lycra wrote: »

You'll also have to factor in the higher rate of SDLT.

And the change to tax rules on interest deductibility if a higher rate tax payer. Could make it more costly than you think.

Retired_Mortgage_Adviser

If you want to get a very rough idea of whether the BTL in the background does or doesn't affect the affordability, have a play around with the Santander affordability calculator here, and make sure you enter the property details accurately, keeping a conservative estimate for expected rent.
https://www.santanderforintermediaries.co.uk/calculators-and-forms/affordability/

This is not a particularly unusual or complicated situation from a broker's pov, and I would most definitely recommend consulting one as early as you can. If you are in the lucky position of the BTL flat being on a low LTV with a good yield, you could even potentially release some equity to add to the deposit for the new mortgage.

dimbo61

You both need to sit down and talk about this.
How much deposit do you have for the new home ?
Yield on the flat ( BTL )
Equity in the BTL ?
Costs to run your business ( yes one BTL is a business )
Do you and your girlfriend want to be Landlords ?
Basic or Higher rate tax payer,
Condition of the flat ?
Cost to make it ready to rent
Costs of taking out 2 new mortgages
Extra Stamp Duty
Would selling the flat give you a much better LTV on the new home
How strong is the relationship